- KeyBanc downgraded Cleveland-Cliffs (CLF) to Sector Weight from Overweight on Jan. 7, 2026, saying recent share gains have priced in catalysts like asset sales, the POSCO MoU, and improved liquidity.
- The firm kept its $13 price target, implying limited upside from current levels.
- Key near-term risks include rising unit costs, lagged steel pricing, and the loss of the ArcelorMittal slab supply contract at end-2025, pressuring free cash flow.
- U.S. carbon steel fundamentals are expected to improve modestly in 2026, leaving upside mainly dependent on CLF execution on cost cuts and non-core asset sales.
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KeyBanc’s recent downgrade from Overweight to Sector Weight on January 7, 2026 reflects a shift in calculus: the firm believes that much of the potential value-creating developments for Cleveland-Cliffs (e.g. asset sales, POSCO MoU, improvement in liquidity) are now reflected in the stock’s elevated share price. This suggests that investors’ expectations are running ahead of the company’s near-term fundamentals.
Although KeyBanc retains some optimism—forecasting hotter-rolled coil prices at ~$880/ton in 2026 and seeing structural upside in non-core asset sales—significant headwinds remain. Rising unit costs, the expiry of the slab supply contract with ArcelorMittal (end-2025), and steel price lag imply that free cash flow will be pressured in the near term. The company has made progress in improving its liquidity and reducing leverage, but recent EBITDA has been modest.
Price targets among analysts are highly variable, with highs around US$16 and lows under US$6-7, which signals divergent views on how well Cleveland-Cliffs can execute cost savings, sell non-core assets, and manage sector headwinds. The current consensus places the stock near “Hold” territory, reflecting mixed sentiment across brokerage forecasts.
From a strategic investor perspective, Cleveland-Cliffs appears to be a “special situation”—one in which successful execution on non-core asset sales, POSCO partnership, cost containment, and favorable steel demand tailwinds could deliver upside. Conversely, missteps in any of those areas, especially amid rising costs or worsening steel price dynamics, could undercut that potential significantly.
Open questions include: how well the POSCO MoU develops into actual revenue or equity contributions; how Cleveland-Cliffs replaces the slab supply contract lost with ArcelorMittal; whether rising maintenance and unit costs manageably impact margins; and how resilient demand (domestic vs. Canadian, automotive vs. non-automotive) will be in 2026 given macroeconomic and trade-policy pressures.
Supporting Notes
- On January 7, 2026, KeyBanc downgraded CLF from Overweight to Sector Weight; price target remained at US$13.
- KeyBanc noted shares have gained over 47% in the past six months, making much upside from earlier catalysts already reflected in the stock price.
- Cost pressures identified include lagged steel pricing, higher unit costs, end of slab contract with ArcelorMittal at end-2025; free cash flow is expected to be under pressure near term.
- Steel pricing for hot-rolled coil is forecasted by KeyBanc at ~$880/ton in 2026, contributing to modest optimism for demand and operator margins in the U.S. carbon steel sector.
- Analyst rating consensus has shifted to approximately “Hold”, with average targets in the US$12–13 range; estimates vary widely (highs ~$16, lows ~$5.75).
- Other analysts (e.g. Wells Fargo, GLJ Research) have mixed or negative outlooks; valuation and sector risks remain significant.